Listed property development firm lowers exposure to ‘worst of the turmoil’ on the high street

A listed property developer which owns assets including the Merrion Centre in Leeds has lowered its exposure to the “worst of the turmoil on the high street” in a year it has focused on improving the mix of its portfolio, its chairman and CEO has stated.
Property development and car park operator, Town Centre Securities, which owns the shopping centre and has recently opened the £70m Merrion House re-development, this morning issued a trading update for the year to 30 June.
Edward Ziff, chairman and chief executive, said: “We continue to make good progress against our strategic aims. The activity of the last 12-months reflects our strategy of continually improving the quality and sector mix of our portfolio for the long-term, whilst ensuring we have a balanced regional portfolio.

“Turning the Merrion Centre into a true mixed-use asset and continuing to lower our exposure to retail has helped ensure we have been protected from the worst of the turmoil on the high street.
“The opportunity for growth that sits within our development pipeline, combined with the recent updating and renewal of our banking facilities put us in a great position to focus on the next phase of our growth.”

The company said that in Leeds, the Merrion Centre had been converted into a “true mixed-use asset” and with the re-development of Merrion House and the ibis Styles hotel. As a result, the dependence on traditional “mall” retail income had reduced to less than a quarter of the total.
Trading during the year saw like-for-like (LFL) passing rent rise 4.1% (2017: 2.3%) but an overall occupancy level drop to 95%, down from 99% in June 2017. The LFL performance included the increased rent from Leeds City Council in Merrion House. Town Centre Securities said that the impact of a vacant unit in Milngavie, Scotland, which the company is currently sub-dividing, had caused the occupancy reduction.
TCS also operates CitiPark, which it said this morning continued to grow its revenues and profits. Town Centre Securities said it ended its year positively. Since the half year results reported on 26 February, the Leeds-headquartered firm has completed purchases in Manchester and Chiswick in London, and the sale of a retail property in Edinburgh.

Leeds and Manchester developments combined made up 73% of the firm’s portfolio during the year. The company has completed the £70m development and occupation of Merrion House with its joint venture partner and tenant Leeds City Council. The TCS share of annual rent now stands at £1.7m for the building.

TCS is also in the process of entering into a JV with Leeds City Council for construction of an apart-hotel with retail units on George Street, alongside Leeds City Market and Victoria Gate.

In Manchester, Piccadilly Basin is the group’s largest development opportunity. TCS said significant progress had been made with the construction of our Burlington House residential development. The scheme, which is being developed in a JV with Highgrove Group, will be held for private rental sector use, with completion targeted for May 2019.

The acquisition of Ducie House, a 33,000 sq ft multi-let office building adjacent to Piccadilly Basin, which was announced on the 8 May 2018, has now completed. It increases the size of its Piccadilly Basin site and in addition to gross annual income of £675,000, the plot includes a 63-space car park providing further development potential for the Basin.

In the last six months, TCS has extended or renewed all if its bank debt facilities. A £35m faciltiy with Lloyds has been renewed for three years, with an option to extend by two years with margins consistent with the previous facility. A further £35m Handelsbanken facility has been renewed for five-years with a small increase in margin reflecting the longer facility term.

And with RBS, TCS has exercised an option to extend its £33m facility by a further year to 2021 at the same margin.

Town Centre Securities said: “As a result, the Company now has certainty over its debt position for the next three to five years, along with improved and more flexible terms in all facilities. Alongside the 2031 £106m debenture, the company is securely financed, and remains committed to lowering debt levels over time.”